Chicago Ry Co v. United States

• Decision Date: 23 November 1931
• Docket Number: No. 69,69
• Citation: 76 L.Ed. 177,52 S.Ct. 87,284 U.S. 80
• Parties: CHICAGO, R. I. & P. RY. CO. et al. v. UNITED STATES et al
• Court: U.S. Supreme Court

284 U.S. 80

52 S.Ct. 87

76 L.Ed. 177

CHICAGO, R. I. & P. RY. CO. et al.

v UNITED STATES et al.

No. 69.

Argued Oct. 14, 1931.

Decided Nov. 23, 1931.

[Syllabus from pages 80-82 intentionally omitted] Messrs. Frank H. Towner, of Chicago, Ill., and Alfred P. Thom, of Washington, D. C., for appellants.

[Argument of Counsel from pages 83-85 intentionally omitted] The Attorney General, Mr. John LordO'Brian, Asst. to Atty. Gen., and Mr. Daniel W. Knowlton, of Washington, D. C., for appellees the United States and Interstate Commerce Commission.

[Argument of Counsel from pages 85-87 intentionally omitted] Mr. Robert E. Quirk, of Washington, D. C., for appellee South Manchester R. Co.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

This suit was brought in the federal District Court for the Northern District of Illinois to set aside parts of an order of the Interstate Commerce Commission made in a proceeding instituted by that body on its own motion. The purpose of the proceeding was to investigate 'the rules for car-hire settlement between common carriers by railroad in the United States for the use and detention of freight cars while on the lines of carriers other than their owners, with a view of making such order or orders in the premises as may be warranted by the record.' All common carriers by railroad in the United States were made parties respondent. The Commission reopened and consolidated with the proceeding a number of cases therefore pending before it, some of which had already been heard and decided. Elaborate hearings were had, at which, generally, the trunk line railroads were represented by the American Railway Association, and the short lines, by the American Short Line Railroad Association. A large amount of testimony was submitted, together with several hundred exhibits. The Commission filed two reports. The first will be found in 1960 I. C. C 369-448, and the second or supplemental report in 165 I. C. C. 495.

The original report discussed the case and concluded with nine specific findings, the first of which follows: '1. Common-carrier railroads, whether subscribers to the per diem agreement of the American Railway Association or nonsubscribers, are entitled to receive reasonable compensation in the form of a daily rental for the use of their general-service freight cars when on foreign lines, and that the present per diem charge of $1 per car day reasonably compensates car owners for average car ownership and maintenance costs. The reasonableness of this per diem rate is not questioned.'

No order was then made, but the carriers affected were expected to conform to the findings and were left to modify their rules and practices accordingly. The carriers having failed and refused to do so, the Commission issued its supplemental report and entered an order giving effect to its findings, by which order the respondents in the proceedings before the Commission were required, on or before October 1, 1930, to cease and desist, and thereafter to abstain, from applying rules for car-hire settlements in conflict with those prescribed by the Commission's order, and were required to establish, on or before that date, and thereafter to maintain and observe, rules with respect to car-hire settlements which shall provide:

'(1) That the same daily car rental shall be paid to common-carrier nonsubscribers as respondents contemporaneously pay to subscribers to the per diem rules agree- ment of the American Railway Association, for the use of general-service freight cars.

'(2) That similar reclaim allowances shall be made to nonsubscribers as to subscribers of the per diem rules agreement, in connection with cars handled in terminal switching service, as the latter term is defined by the switching reclaim rules of the American Railway Association.

'(3) That short-line railroads which are less than 10 miles in length, and which return railroad-owned equipment to the road from which received, shall not be required to report per diem accruals to numerous car owners throughout the country, but shall be attached to their connecting carriers for purpose of car-hire settlement.

'(4) That common-carrier railroads which interchange freight cars with more than one subscriber railroad, and which deliver to one or more subscribing carriers, freight cars which are received from another such carrier, and railroads 100 miles or more in length, regardless of the number of railroads with which they connect, shall make car-hire settlements direct with car owners in accordance with the per diem rules.

'(5) That common-carrier railroads outside switching districts, other than those referred to in paragraph 4 hereof, shall pay per diem to connecting carriers on railroad-owned freight cars after deducting an average of two days free time per loaded freight car interchanged, settlements to be made at the end of each calendar month, except that no car hire need be paid on cars received for return loading with coal from coal mines which are customarily dependent upon connecting carriers for car supply.'

Thereupon, appellants, on behalf of themselves and other carriers similarly situated, brought this suit to set aside paragraphs (2), (3), and (5) of the order. No complaint was made in respect of paragraphs (1) and (4).

The case was heard by a court of three judges, constituted as required by the Urgent Deficiencies Act of October 22, 1913, 38 Stat. 220, U. S. C., title 28, § 47 (28 USCA § 47). That court, without an opinion, made findings and conclusions sustaining the order of the Commission in all respects, and entered a decree of dismissal without prejudice of further applications to the Commission for modification of the order, if, subsequently, injury or unfair results follow from the application of the order.

In the early history of railroad operation, through freight was transferred from the cars of one road to those of the connecting line at junction points. This resulted in waste of time and money, and the railroads themselves soon adopted the practice of permitting the loaded cars to pass from their own tracks to those of the connecting roads, making a charge therefor. See in the Matter of Car Shortage, etc., 12 I. C. C. 561, 573. For many years charges for interchanged cars were on a mileage basis, but this was found impracticable, and a per diem rate generally was substituted. Finally, an agreement was entered into, known as the 'Car Service and Per Diem Agreement,' which provided for an interchange of cars subject to a code of rules adopted by the American Railway association, the general principle of which was that payment should be made to the car-owning railroad for each day the car was off its lines. The railroads subscribing to this agreement are known as 'subscribers,' and other roads, as 'nonsubscribers.' The subscribers, all members of the American Railway Association, comprise nearly 78 per cent. of the steam railroads in the United States; and these operate nearly 98 per cent. of the entire railroad mileage, and own 99.81 per cent. of all the railroad common carrier car equipment of the country. Carriers operating less than 100 miles of railroad are eligible for associate membership but without voting rights. At the time this case was heard by the Commission, the per diem rate was fixed at $1.00 per car. The rules required daily interchange reports in repect of all cars interchanged between subscribers. Generally, nonsubscribers were railroads operating short lines and owning little, or in some cases no, freight car equipment. Provision was made in the rule for a 'reclaim allowance,' that is to say, a refund, to railroads which had paid car rental, to the extent of the per diem expense incurred in handling cars in terminal switching service. This rule was confined to subscribers, and no reclaim allowance was permitted to nonsubscribers for such service.

That the order of the Commission falls within the scope of its statutory powers is clear. Interstate Commerce Act, § 1, subds. 10-14, as amended by Transportation Act, 1920, c. 91, § 402, 41 Stat. 456, 476, U. S. C., title 49, § 1(10) to (14), 49 USCA § 1(10-14). Subdivision (14) provides: 'The commission may, after hearing, on a complaint or upon its own initiative without complaint, establish reasonable rules, regulations, and practices with respect to car service by carriers by railroad subject to this chapter, including the compensation to be paid for the use of any locomotive, car, or other vehicle not owned by the carrier using it, and the penalties or other sanctions for nonobservance of such rules, regulations or practices.'

The authority of the Commission to institute the proceeding on its own motion, and to prescribe reasonable rules relating to the subject of car service, and to prescribe reasonable compensation for the use of the cars of one railroad by another railroad, is conceded. Nor is it disputed that under the law, in the operation of through routes, common carriers subject to the Interstate Commerce Act (49 USCA §§ 1-27) may be obliged to permit their car equipment to be carried beyond their own lines. See Missouri & Illinois Coal Co. v. I. C. R. Co., 22 I. C. C. 39. Appellants assail paragraph (2), (3), and (5) of the order on the grounds that their provisions operate to take property without compensation, are not justified by the evidence, and are discriminatory, unequal, arbitrary, and unreasonable.

First-Paragraph (2). Paragraph (1) of the order, which is not challenged, requires the same daily car rental to be paid to nonsubscribers as is paid to subscribers to the per diem rules agreement. Of this, paragraph (2) is the logical corollary. If nonsubscribers are entitled to be put on terms of equality with subscribers in the matter of liability for car rental payments, it is hard to see why they should not also be entitled to the same equality in respect of refunds of such portions of the payments as...